NEW YORK–Credit ratings agency Standard & Poor's cut ratings on 18 banks yesterday amid concern about further weakening in the financial sector.
S&P said the changes reflected its assessment that volatility will remain in the financial sector and the industry is expected to face tighter regulatory oversight. S&P also said loan losses, which have plagued the industry for more than a year, are likely to continue to increase and could grow beyond expectations.
BB&T Corp., Capital One Financial Corp., Regions Financial Corp. and Wells Fargo & Co. were among the largest banks that saw their ratings cut by S&P.
Widescale changes to the industry because of the credit crisis and ongoing recession will dramatically alter the banking landscape, S&P credit analyst Rodrigo Quintanilla said in a release.
"We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions," Quintanilla said. "... Such a transition period justifies lower ratings as industry players implement changes."
S&P noted recent capital-raising efforts in the sector will help defray some of the losses banks are facing.
Lower credit ratings make it more expensive for companies to borrow money and can sometimes lead to difficulty accessing credit. Low ratings can also affect investments in a company's debt as some institutional investors are required to only hold debt rated at a certain level.
Ratings of Carolina First Bank, Citizens Republic Bancorp, Huntington Bancshares, Synovus Financial and Whitney Holding were cut to junk status. Other banks' ratings remain at investment grade.
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